‘ balance score card corporate performance management-cpm kpi – key performance indicators...
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‘ Balance Score Card
Corporate Performance Management-CPM
KPI – Key Performance Indicators
Business Intelligence
for
Emerging Enterprise’
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Diapers and Beer
Wal-Mart, the world’s largest retailer, supposedly found out that there are certain times at which beer and diapers sell particularly well together - when on Friday evenings young men make a last dash to the supermarket to get beer and their wives call after them, “Pick up some diapers, too, honey!”
“Some of the ways Wal-Mart managers found to exploit their findings are legendary. One such legend is the story, “diapers and beer”. Wal-Mart discovered through data mining that the sales of diapers and beer were
correlated on Friday nights. It determined that the correlation was based on working men who had been asked to pick up diapers on their way home
from work. On Fridays the men figured they deserved a six-pack of beer for their trouble; hence the connection between beer and diapers. By moving these two items closer together, Wal-Mart reportedly saw the sales of both
items increase geometrically.” A version with a slightly different view of the roles involved suggests that the
men are sent to the supermarket for the diapers and, because there’s no time left to go to a bar, take beer home with them. In all versions of the story, Wal-Mart then puts the diapers closer to the beer and makes a
fortune.
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TECHNOLOGY
Business Challenges
Transaction Volume
Market Volatility
Consolidation
CreditManagement
Government Reforms
Large Customer base
Skilled Manpower
Risk Management
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Today’s Business Pressures
Rapidly Changing Conditions• How can I accelerate my planning
and decision cycles?
• How do I monitor conditions and take early corrective action?
Accountability, Transparency• How do I comply with corporate
governance requirements?
• How can I ensure accurate, timely reporting?
Ineffective Decision Support• How do I filter extraneous data
and focus on relevant information?
• How can I access and rationalize disparate, fragmented data?
Efficiency & Cost Control• How can I sustain / improve
profitability?
• How do I keep information current?
Marketing
Risk
Service
Sales
Project MgmtHuman
Resources
Credit
Finance
Plan &ModelPlan &Model
ExecuteExecute
Report &Analyze
Report &Analyze
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Road signs, not red lights
Intelligent traffic lights
for controlling
In the world of the car driver, a traffic light provides two clear signals: red means stop, green means go.
In business reality, this clarity is painfully lacking, and it is something that even multi-colored reports cannot create.
At the traffic light we can only either stop, or drive on.
In contrast, a company has countless ways in which it can react to red or green signals.
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Trends are like friends; with values start seeing trends
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New World Growth & Drivers
Drivers• Internet Users: 35M+• Broadband: 2.M++• Mobiles: 130M++• Credit Cards: 45M+ • Venture Capital !
422
1,058
1,836
3,077
4,924
-
1,000
2,000
3,000
4,000
5,000
6,000
2004-05 2005-06 2006-07 2007-08 2008-09
Year
To
tal
E-c
om
mer
ce M
arke
t ($
Mln
)
Source: IAMAI, PhocusWright, Internal Estimates
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Unthinkable is Happening around usFrequency is increasing and we cannot control it
How do we measure impact on our business
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Data Information Knowledge IntelligenceHindsight Insight Foresight
ETL OLAP Advanced Analytics Sums and Means Drilldown Statistical Predictions
Operational Decisions
Volumes of Data – How to Extract Maximum Utility
• Exponential growth of corporate data and computing power in the past two decades– ETL with sums and means provides hindsight from corporate measurements
– OLAP with drilldown provides insight from the ETL data warehouse
– Only advanced analytics with statistical predictions provides foresight from the ETL data warehouse
• Data Availability + Computing Power + Advanced Analytics → Competitive Advantage and Best Decisions
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You have data quality reporting issues,
whether you know it or not.
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Balanced Scorecard• In 1992, Robert S. Koplan and David Norton introduced
the balanced scorecard, a concept for measuring a company's activities in terms of its vision and strategies, to give managers a comprehensive view of the performance of a business.
• The key new element is focusing not only on financial outcomes but also on the human issues that drive those outcomes, so that organizations focus on the future and act in their long-term best interest.
• The stratagic management system forces managers to focus on the important performance metrics that drive success. It balances a financial perspective with customer, process, and employee perspectives.
• Measures are often indicators of future performance.
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Implementing Balanced Scorecard
• Implementing the scorecard typically includes four processes:– Translating the vision into operational goals; – Communicate the vision and link it to
individual performance; – Business planning; – Feedback and learning and adjusting the
strategy accordingly.
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Balanced Scorecard Perspectives
• The scorecard drives implementation of strategy using perspectives which generally include:– Financial Perspective - measures reflecting financial
performance, – Customer Perspective - measures having a direct
impact on customers and their satisfaction– Business Process Perspective - measures reflecting
the performance of key business processes, – Learning and Growth Perspective - measures
describing the company's learning curve --
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Balance Scorecard – Vision and Strategy
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KPI – Key Performance Indicators
• Key Performance Indicators (KPI) are financial and non-financial metrics used to quantify objectives to reflect strategic performance of an organization.
• KPIs are used in Business Intelligence to assess the present state of the business and to prescribe a course of action.
• The act of monitoring KPIs in real-time is known as Business Activity Monitoring (BAM)
• KPIs are frequently used to "value" difficult to measure activities such as the benefits of leadership development, engagement, service, and satisfaction.
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Example of KPI
• "Increase Average Revenue per Customer from Rs. 1000 to Rs.1500 by EOY 2008".
• In this case, 'Average Revenue Per Customer' is the KPI.
• KPIs should not be confused with a Critical Success Factor
• For the example above, a critical success factor would be something that needs to be in place to achieve that objective; for example, a product launch.
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KPI's need to be SMART
• S - Specific
• M - Measurable
• A - Achievable
• R - Realistic
• T - Timely
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KPI (General)
• EBITDA ProfitabilityCalculation : EBITDA / Revenue Information : Operating Efficiency Frequency : Monthly
Business Value GrowthCalculation : Business Value (current) / Business Value (previous period) Information : Business Management Frequency : Quarterly
Brand RecognizebilityCalculation : Mentions Number Received by Representative Sampling
Information : Business Management Frequency : Quarterly
Market Share GrowthCalculation : Market Share (current) / Market Share (previous period) Information : Marketing Efficiency Frequency : Quarterly
Lost Clients RateCalculation : Lost Accounts Number / Opening Total Accounts Number Information : Business Risk Frequency : Quarterly
Prime Clients RateCalculation : Clients Generating 70% of Revenue / Total Accounts Number Information : Business Risk Indicator Frequency : Quarterly
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KPI (Human Resources)
• Staff TurnoverCalculation : Staff Leaving over the Month / Staff Number at the Last Day of the Month Information : Efficiency Indicator Frequency : Monthly
Recruitment QualityCalculation : New Hires Leaving Within 6 Months / Total Hires Over the Year Information : Efficiency Indicator Frequency : Monthly
Training Days ExecutionCalculation : Actual Training Days / Budget Training Days Information : Efficiency Indicator Frequency : Monthly
Fill Vacancy TimeCalculation : Average time HR required to fill 1 vacancy (broken down by grades) Information : Marketing Efficiency Indicator Frequency : Monthly
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KPI (Information Technology)
• Data loss accidentsCalculation : Data loss accidents happened Information : IT efficiency indicator Frequency : Monthly
Quality of softwareCalculation : Average score at 10-grade. Scale obtained at users survey Information : IT efficiency indicator Frequency : Quarterly
IT budget executionCalculation : Actual IT costs / Planned IT costs Information : IT efficiency indicator Frequency : Quarterly
• Quality of communications bandwidthCalculation : Average score at 10-grade. Scale obtained at users survey Information : IT efficiency indicator Frequency : Quarterly
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KPI (Internal Operations)
• Cycle timesCalculation : Information : Efficiency Indicator Frequency : Monthly
Inventory turnoversCalculation : Information : Business Management Efficiency Indicator Frequency : Quarterly
Defect ratesInformation : Quality Indicator Frequency : Monthly
Plant utilizationInformation : Marketing Efficiency Indicator Frequency : Quarterly
Unit cost compared to competition,Information : Marketing Efficiency Indicator Frequency : Quarterly
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KPI (Innovations)
• Number of new productsCalculation : Number of new productsInformation : Efficiency Indicator Frequency : Yearly
Number of patentsCalculation : Number of patentsInformation : Business Management Efficiency Indicator Frequency : Yearly
New technologies adoptedInformation : Efficiency Indicator Frequency : Monthly
System improvements implementedInformation : Efficiency Indicator Frequency : Quarterly
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Corporate Performance Management
‘Corporate Performance Management (CPM) is the area of
Business Intelligence (BI) involved with monitoring and managing
an organization's performance, according to
Key Performance Indicators (KPIs)
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CPM Significance
• Marketing Departments can develop better products & services, assess the results of campaigns, better understand their target market, cross sell, upsell…
• Credit Departments can leverage CPM for collaborative analysis and slicing and dicing data in new and creative ways
• Human Resource Departments can use it extensively to analyze the workforce and the impact of salary and related decisions
• Executives can get real-time access to key performance indicators, and would be able to interact and drill-down on data as against a static number
• Portfolio & Fund Departments can analyse patterns for effective and faster investment decisions
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What CPM enables?• Make the right investments in products, people, projects and processes
• Continuously assess operational performance based on key performance indicators and historical trends
• Adjust & re-align strategies as needed to achieve organizational goals
• Deliver consistent information to all levels within the organization for collaborative performance
• Visualise enterprise-wide planning and budgeting in a single model
• Analyze customer, product and services profitability in real-time
• Consolidate financial data from disparate sources across the entire enterprise
• Standardise on data communication, data comprehension & data control
• Optimise IT resources and infrastructure
• Single version of the truth
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CPM Framework
C3 : Communication, Comprehension, Control
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CPM Elements
Business Measurements
Information Management
Business Processes &
Activities
Operational Objectives
Strategic Objectives &
Goals
IT infrastructure
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CPM factors
Internal External
Business Functions Statutory Compliance
Data Integration Market
Hierarchy External Entities
Security Industry Regulations
Operational Discipline Competition
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Initiating CPM
• Integrate and take advantage of existing IT assets
• Identify the data integration strategy
• Identify a Business Intelligence strategy (Operational + Tactical)
• Blending Business Intelligence with elements of planning, budgeting and appropriate-time monitoring
• Identify measurable Business Performance Parameters (BPP)
• Peg operational data with BPP
• Improve and simplify pegging continuously
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Structured CPM methodology Eg: KPI
Back Office application running on Oracle, Transaction application running on SQL,
KPI Data Sources
BothKPI Internal or Customer Facing
Mr. ABCKPI Benefactor
Mr. ABCKPI Initiator
Mr. XYZKPI Sponsor
7days, 1 dayAnticipate Upper and Lower Limits
Plus or minus 1 dayKPI Upper & Lower Tolerances
Less than 3 daysKPI Target Value
DaysKPI Unit of Measure & Formula
12 months, DailyKPI Life Span & Reporting Periodicity
31-Mar-08KPI End Date
1-Apr-07KPI Start Date
Better Cash flow KPI Benefits
Maintain credit period of less than 3 daysKPI Objective
Ageing AnalysisKPI Description
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Data Communication
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Data Comprehension
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Data Control
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Data Communication
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Data Comprehension
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Data Control
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Summary
• CPM is not a technology, but a Business Strategy
• Core concept for CPM : C3
(Communication, Comprehension & Control)
• Business Intelligence is an Intelligent first step in incorporating CPM
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"If you don't have a
dashboard you can't
drive the car.
Performance related
Information is like Compass will give you
right directions
Clear Marketing Directions and Road Map
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Thank You!